Question

Profit margins for disruptive innovations are usually worse than those for incumbent technologies _________.

A) due to higher production costs
B) because of increased competition
C) as disruptive innovations target niche markets
D) as incumbent technologies have established markets

Answer 1

Profit margins for disruptive innovations are usually worse than those for incumbent technologies because incumbent technologies have established markets.

Step-by-step explanation:

Profit margins for disruptive innovations are usually worse than those for incumbent technologies because incumbent technologies have established markets.

When a new disruptive innovation enters the market, it often has to compete with established technologies that already have a customer base and market share. The established technologies have built brand loyalty and trust among customers, making it difficult for the disruptive innovation to gain a foothold. This can result in lower profit margins for the disruptive innovation.

For example, consider the introduction of electric cars as a disruptive innovation. While electric cars offer environmental benefits and potential cost savings in the long run, they face competition from traditional gasoline-powered cars that have an established infrastructure of gas stations, widespread availability, and a long history of consumer trust. As a result, electric car manufacturers may initially struggle to achieve high profit margins.